In at the last few years, natural gas has flooded the market making it a valuable fuel for electricity generation, but we live in a global economy where commodities trade across borders and new technology constantly spring up. Fuel prices and availability fluctuates. To prevent price spikes and maintain reliable generating capacity, electricity producers need energy diversity--natural gas, coal, nuclear, hydro, solar, and wind. On Tuesday, the House of Representatives Energy and Power Subcommittee held a hearing on this subject.
American Electric Power (AEP) Executive Vice President for Generation Mark McCullough warned Members,
[P]olicies that could prevent the construction of new baseload generating units or force the retirement of existing coal-fired capacity could cause significant shifts to this balanced energy mix; reduce capacity diversity; and hinder our ability to provide reliable and affordable electricity to our communities and customers.
McCullough added that proposed greenhouse gas regulations targeting coal-fired plants would "effectively prohibits the construction of any new coal-fired power plant." He concluded:
Due to these regulations, as well as numerous other challenges facing nuclear energy, our nation’s electric grid will become increasingly reliant on natural gas for new generation capacity, likely eliminating both diversity and flexibility in new power plant builds. Federal policy should support fuel diversity, not preclude it.
John McClure, Vice-President and General Counsel of the Nebraska Public Power District (NPPD) also testified on the need for fuel diversity. While the NPPD generates nearly 60% of its electricity from coal it also employs nuclear, hydro, wind, and natural gas. He explained to the Members of Congress:
While the supply and price of natural gas has been a game-changer and is a critical part of a diverse fuel mix, it is not the silver bullet. What many do not realize is coal remains a more competitively priced fuel for certain regions of the country due to the proximity of supply, especially in the central and western U.S. Natural gas may be a great option if your power plant is located near a robust network of gas pipelines, but unfortunately many of the existing coal plants do not have access to pipeline capacity to convert from coal to natural gas.
McClure added, "[F]uel choices go in and out of vogue, and that a diverse mix of fuel is important to deal with the economic and policy swings that can happen over a longer period of time."
Reliability needs fuel balance and diversity. Good policy should support that and not attempt to drive a vital fuel source like coal from the market.
A Congressional Research Service report finds that the administration deserves zero credit for America’s oil and gas boom. The increase in oil production has been from state and private lands:
On non-federal lands, there were modest fluctuations in oil production from fiscal years (FY) 2008-2010, then a significant increase from FY2010 to FY2012 increasing total U.S. oil production by about 1.1 million barrels per day over FY2007 production levels. All of the increase from FY2007 to FY2012 took place on non-federal lands, and the federal share of total U.S. crude oil production fell by about seven percentage points.
In the case of natural gas, while production has increased by 20% since 2007, “production on federal lands (onshore and offshore) fell by about 33%.”
Part of the problem is the slow process which raised the time it takes to get a permit by over 40% from 2006 to 2011. The report states that the Bureau of Land Management explains that this increase is due to the “complexity of the process.” The report concludes: “A more efficient permitting process may be an added incentive for the industry to invest in developing federal resources, which may allow for some oil and gas to come onstream sooner.”
In a press release, House of Representatives Energy and Power Subcommittee Chairman Ed Whitfield (R-KY) said, "Where the states have been in charge, we have seen energy development boom in a safe and responsible way, but under federal control we have seen a sharp decline in production."
I've been harping on this for some time so it's always good to get additional evidence. We should also remember that by failing to develop federal lands, we're missing out on federal revenue and economic output:
The Institute for Energy Research released a study by Dr. Joseph Mason, a professor at Louisiana State University, in response to a Congressional Budget Office report from August that analyzed the benefits of opening up federal lands and waters that are restricted by law or administration policy from leasing.
“Even conservatively estimated, the economic effects of allowing access to U.S. energy resources are significant,” Mason told reporters over the phone.
The CBO found that opening up federal lands would generate a total of $7 billion in revenues during the first decade — $5 billion from ANWR and $2 billion from areas of the outer continental shelf. The CBO projected revenues from opening more lands to be between $2 billion and $4 billion from 2023 to 2035.
Mason found that opening up more federal lands would generate as much as $24 billion annually in taxes over seven years for the federal government in addition to lease revenues estimated by the CBO. In the long-run, $86 billion annually would be generated in federal taxes from more activity on federal lands and in federal waters.
States and local governments would see huge gains in tax revenues as well — $10.3 billion annually over the next seven years and $35.5 billion annually after that.
Also, watch this video by U.S. Chamber’s Senior Vice President for the Environment, Technology & Regulatory Affairs Bill Kovacs on why these permitting delays to energy projects hurt job creation.
Today in Houston, energy experts from across the globe are meeting at the annual HIS CERAWeek conference. FuelFix reports:
A lot has happened in the past year. [Conference chairman Daniel] Yergin and CERAWeek co-founder and co-chair James Rosenfield said the 2013 conference reflects that, including sessions on growing cybersecurity threats facing energy companies and facilities, the continuing boom in production from shale and other unconventional plays, and navigation of the recovering economy.
“There is a growing recognition that unconventional gas and oil is here to stay,” said Rosenfield, senior vice president at IHS. “The shift from gas to oil, and tight oil in particular, and the emphasis on liquids.”
Unconventional gas and oil from hydraulic fracturing has caused a record-setting year for American oil and gas development. The U.S. Energy Information Agency (EIA) reported that crude oil production hit a 20-year high last November and December. The American Enterprise Institute’s Mark Perry noted that if North Dakota and Texas--where much of America’s oil production growth is taking place--were its own country, it’d be the “9th largest oil-producing nation in the world.” Also, EIA noted that natural gas production set a record in 2012.
Yergin told Politico Pro the oil and gas boom has changed the energy discussion: “Energy policy for almost four decades has been dominated by the notion of scarcity. We’re not floating out in a sea of oil and gas, but there’s a sense that the U.S. position is much, much better than had been thought.”
While the U.S. is in a great position, many in Congress think it would be smart to “fix” the sequester, across-the-board spending cuts, by targeting energy producers with higher taxes. Former Mississippi governor Haley Barbour rejects this idea:
The oil and gas industry is already the highest-taxed industrial sector in the country, pumping about $86 million a day of taxes and fees into federal coffers. That’s $31 billion annually. A completely arbitrary tax hike on the energy industry would not only reduce industry growth, it would squelch job creation and pass higher energy costs along to consumers.
Instead of trying to weigh it down energy with taxes, let’s encourage American oil and gas development to create more jobs and boost economic growth.
In case you were a normal American and finishing up your workweek last Friday afternoon, you may have missed the State Department releasing a draft supplemental environmental impact statement finding that the proposed Keystone XL pipeline wouldn’t have significant environmental impact.
Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy called the news, “long overdue, and continues to build a strong case supporting the construction of the Keystone XL pipeline.”
Here are some other reactions to the report. The conclusion: The time for study is over. The administration should approve Keystone XL’s construction. Let’s build it now.
If the Alberta oil doesn't flow south to America via the Keystone XL, it will flow west to China via other pipelines or rail. It will also flow to the Gulf Coast by other means, including pipelines and rail to East Coast ports, and then via tankers in the Atlantic and around Florida. Keystone XL will have a smaller "carbon footprint" than these alternatives.
As for the danger of spills, the high-tech pipeline will be buried underground and contain valves that allow for rapid detection and shutoff. The environmental risk is arguably greater on a tanker. Even if the oil sands were shut down entirely, Gulf Coast refineries would merely use the similarly heavy oil from Venezuela, also shipped via tankers.
Thus the issue is not whether the oil will flow but how much Americans will benefit. A rule of thumb is that for every dollar of imported foreign oil, North America receives about 10 cents of the economic benefit. The Venezuelans, Saudis and others get the rest. The benefit from oil produced in North America is roughly 80-90 cents of each $1. This includes the cost of producing and transporting the oil, and the ancillary jobs and sales that flow from it. The Keystone XL has also reserved space for about 250,000 barrels a day of oil produced in the U.S., which means a new and environmentally safer outlet for oil from the booming Bakken fields of North Dakota.
Senator Heidi Heitkamp (D-ND):
I am pleased that the State Department has taken the next step towards what should be the eventual approval by the President of the Keystone XL pipeline. The statement released today was the result of what is now one of the most thorough studies of any pipeline project, and the draft SEIS suggests that they have found little reason for further delay of this project. I have supported this project since it was initially proposed because it is good for North Dakota and good for our nation.
The State Department should now announce a concrete timeline for comments to be submitted and for a “national interest” determination to be made. The State Department and the President must adhere to this timeline and finally approve the construction of the pipeline. This will put thousands of Americans to work on a project that will deliver oil to U.S. refineries from our friendly neighbor and ally to the north.
Senator John Hoeven (R-ND):
After nearly five years of review, and a favorable supplemental study, the president needs to approve the Keystone XL pipeline. We again ask, as we have before, that President Obama and Secretary of State Kerry provide us with an actual timeline and some certainty as to when this long delayed project will finally get a decision.
The Keystone XL project will provide tens of thousands of jobs and hundreds of millions of dollars in revenue to help us reduce our deficit and debt, and it will do so with good environmental stewardship. With 70 percent of the American people in support of it and 12 million Americans still out of work, there is no reasonable excuse to postpone a decision any further.
American Petroleum Institute Executive Vice President Marty Durbin:
The president could truly implement his ‘all of the above’ energy strategy by approving Keystone XL,” Durbin said. “We hope the president will choose to side with the American people who strongly support the pipeline in poll after poll. The project will create thousands of good paying jobs for the safest, most highly trained workers of the building trades at a time when construction workers have an unemployment rate higher than the national average. Keystone XL will also enhance our energy security. It would be a win win for the U.S.
National Association of Manufacturers (NAM) Assistant Vice President of Energy and Resources Policy Chip Yost:
Americans are frustrated with Washington’s inaction, and Keystone XL is a prime example of inexcusable bureaucracy and red tape. It’s time for the Administration to expeditiously complete its review and approve the pipeline to put Americans back to work.
Bloomberg television had a good panel discussion on the economics of Keystone XL and increased North American energy security.
The State Department released a draft supplemental environmental impact statement for the Keystone XL pipeline and again found that it wouldn’t have a significant impact on the environment.
Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy, issued this statement:
The Environmental Impact Statement released today is long overdue, and continues to build a strong case supporting the construction of the Keystone XL pipeline. The Keystone XL project has become one of the most closely examined infrastructure projects in our nation’s history—and it continues to pass with flying colors. Once again, the State Department has confirmed that this project is environmentally sound.
The Keystone XL pipeline will make more Canadian and U.S. oil available to us—oil that will not need to be imported from unfriendly places. It will create thousands of jobs and generate millions in revenue for state and local governments that badly need them. We’ll be working over the next 45 days to ensure that the voice of the majority of American people, who favor this project, is heard loud and clear by the Obama Administration.
The State Department report states, that if safeguards are followed, there will be “no significant impacts to most resources along the proposed project route.”
It finds that the pipeline’s construction would support 42,100 jobs during the one-to-two-year construction period, which would bring about $2.05 billion in wages, as well as another $3.3 billion in other spending. It will also provide $2 million annually after construction in additional property taxes for Montana, South Dakota, and Nebraska.
The report also destroys a key talking point by anti-energy groups who argue that stopping the pipeline would stop crude from Canadian oil sands from coming to market. “[A]pproval or denial of the proposed Project is unlikely to have a substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf Coast area,” it reads. It goes on to state that, “If all pipeline capacity were restricted, oil sands production could decrease by approximately 2 to 4 percent by 2030.” Alternative methods of moving oil would be used.
Support for the Keystone XL pipeline is wide-ranging. Business and labor unions back it, there’s bipartisan support, and the public endorses it. It’s time for President Obama to approve the pipeline so American can reap its job-creating and energy security benefits.